BackSensex closes 183 points, Nifty above 7,880 on GST reform hopes
Sensex, Nifty rose for the first time this week amid optimism that PM Narendra Modi may be able to push through the GST bill in the Parliament session
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Mumbai: Indian stocks advanced for the first time this week amid optimism that Prime Minister Narendra Modi may be able to push through the crucial goods and services tax (GST) bill in the Parliament session starting Thursday.
Sun Pharmaceutical Industries Ltd climbed the most in three months after the nation’s most valuable drug maker shelved a plan to invest in a wind energy project in the US. DLF Ltd capped its biggest three-day advance since August after founders of India’s largest developer raised their stake. Dr Reddy’s Laboratories Ltd is poised for its worst month since January 2008 after the US Food and Drug Administration (FDA) posted a previously disclosed letter warning the company over violations of good manufacturing practices.
The S&P BSE Sensex climbed 0.7%, or 182.89 points, to 25,958.63 in Mumbai. While Modi took steps this month to boost foreign investment, the GST bill has become a bellwether for progress after being repeatedly blocked by opponents. The gauge has slid 2.6% in November, headed for the worst month since August, as foreigners sold $753 million of shares after the defeat of Modi’s Bharatiya Janata Party in a key state elections raised concern that his ability to push through economic policies will be hampered.
Meanwhile, the Nifty 50 index of the National Stock Exchange closed 0.67%, or 52.20 points, higher at 7,883.80.
“There’s a lot of build-up happening on the GST," V. Srivastava, a fund manager at UTI Asset Management Co., which has $14 billion, said in an interview with Bloomberg TV India in Mumbai. “The GST bill, if it gets passed this session, will give markets a leg up." He’s bullish on auto makers and logistics companies.
GST compromise
Finance minister Arun Jaitley said this month that he has enough support to pass the GST if only opposition parties allow a vote. The main opposition Congress party wants the GST rate capped at 18% and no additional 1% tax on goods crossing the border of producing states. Those changes would please business groups but make it harder for the constitutional amendment to be approved by more than half of India’s 29 states.
Sun Pharmaceutical Industries surged the most since 19 Aug. The stock is still down 37% from this year’s high on 6 April. The shares soared 46% in 2014.
“Investors have given you a mandate to run the pharma business," Deven Choksey, managing director at Mumbai-based K.R. Choksey Shares & Securities Pvt., said in an in interview to Bloomberg TV India on Thursday. “It’s a prudent decision to not invest in the wind business."
FDA warning
Dr Reddy’s plunged 8.5% to its lowest level since 9 February. The stock has fallen 28% in November, set for its worst month since January 2008. The drug maker said this month it received a warning letter over two locations making pharmaceutical ingredients and another making cancer formulations.
Sun Pharma and Dr Reddy’s are the worst performing stocks on the S&P BSE Healthcare index in the past month. The gauge has tumbled 9.4% in November, headed for the worst month since October 2008. The slide has dragged its valuation to 23 times projected 12-month profits, the least expensive versus the Sensex since the end of June.
“Indian pharma companies have fallen behind in terms of the standards that the FDA wants, and now have work ahead of them," Shiv Puri, managing Director at TVF Capital Advisors, said in an interview with Bloomberg TV India. “These aren’t structural issues that have damaged the industry for good. The structural tailwinds for this industry still look very promising."
Tata Motors soared 5.9%, the best performer on the Sensex today. The stock has rallied 42% in the current quarter.
DLF jumped 6%, the most since 8 September. Housing Development and Infrastructure Ltd rallied 3.8%, extending the five-day gain to 12%. Godrej Properties Ltd rose to a three-week high, sending a gauge of developers to its highest since Nov. 6. Bloomberg
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